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2 Responses to “Remember the price signals thingy?”

Should we be paying attention to what ANY market is saying right now? The wild shifts in prices, including oil prices and the Dow’s swaying, imply the markets are basically confused right now and won’t settle down until there’s a more certain economic policy in place.

Next point: The downward shift in oil prices may be only a short-term pressure. In the long term, aren’t oil prices more likely to rise?

Markets have short-term bubbles, yes, but if you look at the trends the bubble was the preposterous pricing of this fall, not the current price.

Anyway, even if you were right, when is this “long term”? Would you buy a CD that promised to pay you back a great return “in the long term”? Would you make me buy one, i.e., use taxpayer money to guess at these trends?

And why on earth would you think that the long term for oil is different from other commodities? Because there’s a finite supply? That’s true of all commodities , yet prices do not merely rise, and frequently fall, because of the effects of how the free market directs choice and long run optimization of the allocation of most resources. The same is true of oil. Haven’t you ever read Julian Simon? Here‘s a thoughtful discussion — and I include the comments — of some of the issues, actually, though comments trail off well before the recent drop in prices.